Tower Limited (TWR) Earnings Call Transcript & Summary

Welcome to the Tower Limited Full Year Results Announcement 2022. [Operator Instructions] Please be advised that today's conference will be recorded. And I would now like to hand the conference over to your speaker today, Chairman, Michael Stiassny. Please go ahead.

Morena and good morning. Firstly, may I apologize for the delay and advise you that the file size of our announcement did not exceed NZX limits and the problem is at the NZX's end. So we apologize on behalf of the NZX and ourselves, and we can now get into the presentation. So thanks for making the time to join us for this investor call and the presentation of our 2022 full year results. With me in Auckland is our Chief Executive Officer, Blair Turnbull; and our Chief Financial Officer, Paul Johnston, who will take you through the results and answer your questions. This has been a positive year for Tower. Business has experienced solid growth, delivered a strong underlying business performance and continues to be well capitalized. Importantly, despite the inflationary headwinds and pandemic-induced difficulties that all businesses are struggling with, Tower has proved resilient in 2022 and remains well positioned, if not very well positioned for long-term growth. As a result, I'm pleased to announce the Board has declared a final dividend of $0.04 per share to be paid on 1 Feb 2023. This brings total dividends for FY '22 to $0.065 per share. In late 2021, the Board announced the share buyback as a result of the Reserve Bank lowering Tower's solvency condition. This was completed on February 22, with $30.6 million being returned to shareholders. In June, in recognition of our strong financial position, the Reserve Bank once again reduced Tower's license condition from $25 million to $15 million, and ratings agency AM Best reaffirmed our A- excellent rating in April. We continue to look for investments that will deliver strong shareholder value. To that end, over the year, we completed our purchase of the minority interest of National Pacific Insurance and also completed our program of acquiring legacy books and migrating them to the Tower Direct. This has resulted in further efficiencies and growth benefits, which Blair will expand on shortly. It's been gratifying to see that the actions Tower has taken to address challenges, including record inflation, supply chain issues, access to talent and increasing large events are having the desired effect. However, there is no room for complacency, and we remain tightly focused on continuing to manage the inflationary pressures that are likely to be prevalent for some time. Climate change is the defining challenge of our lifetime. Proactively managing the risks posed by climate change is fundamental to protecting our customers, our communities and to you, our shareholder interests. In the last year, we introduced flood risk-based pricing and parametric insurance to better inform and to prepare our customers and our business for the future. Increasing the large event limits in our financial plans and Tower's reinsurance program also provide necessary protection from this volatility. In the coming financial year, we will respond to the government's new climate related disclosures reporting regime by beginning to share the risks and opportunities we anticipate from a range of potential climate change scenarios. We see this regime as a positive opportunity to further inform our business strategy and support future resilience. The year's strong performance reflects the investments we have made in our core technology platform and distribution footprint, which have positioned Tower well to continue delivering GWP growth. Our flagship Tower Direct business and unique partnership distribution capability continues to grow from strength-to-strength. Digitization of our Pacific business continues at pace, and we are now operating on 1 core platform across New Zealand and Pacific, leading to further improvements in efficiency and competitiveness. There have been some significant changes to the Board this year. I'd like to publicly acknowledge and to personally thank Steve Smith and Warren Lee, both of whom have made considerable contributions to Tower's transformation over many years. I'd also like to welcome Geraldine McBride, who recently joined our Board. Geraldine brings extensive New Zealand and international governments and technology industry experience that will be invaluable as the Tower continues to evolve. Finally, in closing, I'd like to thank everyone in the Tower team. It's a good result. We're paying a dividend. The business remains strong and well capitalized and has achieved sustained premium growth. None of this would be possible without the vision, dedication and commitment of all our people. I'll now hand over to Blair and Paul, who will take you through the results and outlook before we take questions.

Kia ora. Thank you, Michael, and good morning, everyone. I'm delighted to be here sharing our 2022 financial results, which see Tower in a very positive position. Today's results demonstrate the resilience of our customer and digitally led strategy. We are continuing to grow, to drive down expenses and to innovate a customer experience. Our technology and direct distribution advantage sets us apart from our competitors and affords strong long-term customer and premium growth prospects. I'm pleased to report positive business performance for the year, which has been achieved through strong growth and efficiencies. Offering our customers a simple and rewarding experience through our leading technology platform has helped grow Tower's gross written premium for the year to 30 September to $457 million, up 13% on the same period last year. Good customer growth was a key contributor to this with Tower welcoming 15,000 new customers in the past 12 months, increasing to 319,000 customers overall. As the Chair referenced, we are managing external headwinds well with Tower's BAU claims ratio dropping to 48.9% from 50.2% in the 2021 financial year. We are pleased to have seen our management expense ratio, MER, improve again to 36% versus 37% in FY '21, thanks to our disciplined cost control and further efficiencies. Tower planned for $20 million of large event costs for the FY '22 year and it came in at $19 million net impact, up from $13.9 million net in FY '21. And pleasingly, a combined operating ratio decreased to 90.1% from 91.4% in FY '21. Reflecting a positive business performance, underlying NPAT, including large events, was $27.3 million, up 31% from $20.8 million in FY '21, with reported profit was down 2% at $18.9 million versus $19.3 million in FY '21. So looking closely at the core business performance. Our business fundamentals continue to improve as we drive double-digit growth and our investments in our core technology platform and actions to control inflationary pressures continue to deliver efficiencies. Our core business performance has improved substantially, with underlying NPAT, excluding large events, increasing 33% year-on-year to $41 million. As we disclosed in our guidance update on the 17th of October, our reported profit was impacted by additional strengthening of the residual Canterbury Earthquake provision, which Paul will talk through in more detail shortly. Additionally, we've made a provision of $2.6 million after tax for customer remediation arising from an error in the calculation of multi-policy discounts. After we identified the issue, we proactively advised the financial markets authority, and we're in the process of identifying affected customers and expect to begin processing refunds in December shortly. Strong growth in customers and premium. So Tower's focus on simple and rewarding customer experiences, combined with our digital and data capability, have contributed to strong growth in both premium and customers. And during the financial year, we grew our gross written premium 13% year-on-year up to $557 million. We also grew customer numbers to 319,000, up 5% on the last financial year. As digitization strategy is driving deeper customer engagement and growth with the number of Tower Direct quotes online increasing to 292,000 leading to 66% of sales now taking place on digital channels. These new customers are being brought on board at a lower cost to acquire at 12% of net earned premium versus 12.6% in FY '21. However, it's not just about attracting new customers. Most pleasingly, 1/2 of our New Zealand customers have 2 or more products with Tower, which shows we are continuing to sell more to existing customers as we grow. 2 achievements we are particularly proud of this year are winning Canstar's top Car Insurer of the Year Award and also the outstanding Value Award for the second year running. All 3 of our business units are growing and improving performance. Our flagship Tower Direct business is going from strength-to-strength, growing GWP by 17% to $320 million as we innovate to build rewarding and engaging relationships with customers, and our leading digital platform continues to perform strongly and increase customer engagement. In FY '22, we recorded a milestone 200,000 My Tower registrations, up 51% on FY '21, and this has contributed to a record 500,000 logins in FY '22, up 56% on FY '21. Contributing to this success is our strong 85% retention of the customers we have transitioned to Tower Direct via legacy book acquisition program. We are pleased that an important aspect of our digital self-service experience is valued by customers with our online purchase journey, achieving a customer Net Promoter Score of 61%, up from 57% in FY '21. Turning to partnerships. Our partnership business is continuing to deliver positive growth with GWP from active partners increasing by 35% to $54 million. Our flagship Trade Me partner contributed strongly to this growth, growing by 38% to $25 million GWP. The number of advisers referring customers to Tower has also expanded, increasing by 35% over the year to 1,500 active advisers and this growth will be further bolstered by a new agreement with advisory firm, Kiwi Adviser Network. We continue to attract new retail partners. And in September, we were very pleased to enter a significant partnership with leading real estate agency Ray White, which sells 20,000 houses a year across New Zealand. We look forward to welcoming Ray White's customers to Tower as part of its successful concierge insurance and moving solutions offering. This year, we completed the delivery of our strategy of acquiring legacy insurance books and migrating them to Tower Direct. And between February 2021 and October 2022, we purchased books for a total price of $26 million from ANZ, Westpac, TSB and Kiwibank, ending commission payments of around $11 million per annum and enabling us to have a direct relationship with these customers who represent more than 88,000 risks, and this strategy has contributed to commission payments further reducing to just 2.2% of gross earned premium. Modernizing the Pacific, FY '22 was a milestone year for our Pacific business, which has returned to growth after the challenges of COVID, growing GWP by 8% to $58 million in the year. We are continuing to digitize our Pacific offering, aligning our New Zealand and Pacific activities more closely to deliver growth and efficiencies. Our core operating platform is now live across all markets. We have launched the Pacific Industry-first online payments capability and the full My Tower experience is now available across Fiji and Vanuatu. We are continuing the simplification of our Pacific business. And to this end, sold our Papua New Guinea subsidiary in October and have now begun operating under the Tower brand following our acquisition of the minority interest in National Pacific Insurance. Turning to underwriting accuracy and our expanded product range. Our strategy of leading with an innovative product range, which enables us to deepen our customer relationships, improve revenue and increase retention has further progressed in FY '22. Early in the year, we launched new pet and travel offerings and in August, began supporting customers with their home renovations by launching contract works cover. In a particularly innovative approach, we have now begun piloting a cyclone parametric insurance product in Fiji. Cyclone response cover provides a rapid cash payout when a customer is impacted by a high wind speed cyclone event regardless of damage and without the need for an insurance assessor sign-off. With less than 10% of Pacific families having home insurance, we hope this will address a much-needed gap in the market and help provide economic resilience following a cyclone event. Since broadening the range of EVs, we ensure in 2021 and government schemes to incentivize uptake of EVs and hybrid vehicles, the number of EVs we underwrite has continued to soar, increasing 78% to more than 4,000 electric vehicles during FY '22. And underpinning our rapid and targeted product development capability is a disciplined and agile approach to underwriting, enhanced through our use of data analytics. And the sophisticated underwriting approach saw us quickly implement risk-based pricing for flooding in November last year, which has enabled us to transition 145,000 customers to this new pricing model as their house insurance policies have come up for renewal. In FY '23, we will add coastal inundation and erosion and windstorm risks to our ratings tool, offering customers' greater insights into their homes risks and giving Tower even better rating accuracy. Ensuring accurate sum insured amounts for our customers' homes is one tool that's allowing us to stay ahead of inflation. In FY '22, 97% of our home insurance customers' policies were updated automatically, either by the Consumer Price Index or the Cordell calculator compared to only 77% a year ago. We are continuously monitoring our pricing to ensure we stay both competitive and profitable. Agility and data-driven capabilities have enabled us to make more than 140 pricing and underwriting adjustments in the last year. And our underwriting capability is becoming increasingly automated, with 95% of risks in New Zealand now sold without requiring a manual underwriting review. Inflation, inflation impacts all facets of our lives, including how far our insurance cover will stretch at claims time. And due to the sharp increase in inflation over the previous 12 months in FY '22, it became more expensive to repair and rebuild homes and repair or replace cars and contents. But Tower's advantage and our ability to identify and quickly address emerging trends, thanks to our investments in digital and data technology and the decisive actions we've taken over the past 18 months to deliver improvements. Our increasing scale is also continuing to deliver efficiencies with Tower's BAU claims ratio being brought back to a very strong level of 48.9% compared to 50.2% in the 2021 financial year. Despite the stormy weather across New Zealand this year, resulting in total claims costs of $18 million compared to the 5-year average of $11 million and New Zealand claims volumes overall increasing to almost 73,000 individual claims over the year. By working with suppliers to optimize our supply chain, we are seeing efficiencies with 77% of New Zealand motor repairs now being completed by a preferred supplier network. And our work to streamline the claims lodgment process has seen the number of New Zealand claims lodged online increased from 31% to just to 48%, so improving MER through simplification and platform efficiency. By global standards, a 1% reduction in management expense ratio is a good result in any year for an insurer. So in this highly inflationary environment, we are particularly pleased to have achieved yet another improvement in MER to 36% this year, with half of all tasks and transactions in New Zealand now completed digitally versus 46% in FY '21, the customer and efficiency benefits from our leading digital and data technology platform are being realized. 2 key drivers of our reducing expenses are the commission saved through the transformation of our partnerships business to a lower commission model and the legacy book acquisition program. We are on track with decommissioning legacy systems and now have just 2 remaining, down from 4 in FY '21. I will now hand over to Paul Johnston to present a detailed financial performance.

Thank you, Blair, and good morning, everyone. Looking at the consolidated results, we can see that growth in GWP continued to be a highlight, up $53.2 million or 13% on FY '21. As Blair just highlighted, management expenses have improved 1% as benefits of the EIS platform and our increasing scale continue to be realized along with lower commissions through our legacy portfolio of acquisitions. Underlying NPAT, including large events, increased 31% to $27.3 million, demonstrating strong business performance. Reported NPAT was down $18.9 million, down 2% on FY '21. Contributing to this was a Canterbury Earthquake valuation increase of $5.5 million after tax and a provision for customer remediation of $2.6 million after tax. As this chart demonstrates, business growth contributed a strong $13.6 million increase to Tower's underlying NPAT of $27.3 million in the year, which is $6.5 million above FY '21. As we have previously noted, reduced commissions provided a $1.4 million benefit to the result. FY '22 saw a $5.1 million increase in large events costs compared to FY '21, which reduced underlying NPAT by $3.7 million after tax. Large event costs were $19 million net of reinsurance and a prior period recovery, up from $13.9 million in FY '21. A $6.3 million after tax increase in expenses includes amortization of the legacy back book purchases and an increase in staffing costs due to wage inflation and an increase in both growth and regulatory compliance spend. As we have previously noted, reported profit has been impacted by a $5.5 million after tax Canterbury Earthquake valuation increase across FY '22 as a result of new claims valued more than the historic $100,000 EQC cap and the complexity of existing claims and inflation. We have also made a provision for customer remediation, which includes compensation payments as a result of discounts for taking out more than one policy being incorrectly applied. The positive actions we have taken in the last 18 months to address the rapidly increasing inflationary pressures and an increased number of severe weather events are seeing results as evidenced by our BAU loss ratio improving to 48.9%. Frequency and severity are the 2 key components of total claims costs. The charts show average motor claim severity is following a rising trend up to $2,713, while frequency of motor claims is flat due to the lockdown we saw at the start of the financial year. House claims have continued to increase year-on-year and are up 7.1%, largely as a result of the wettest winter on record in New Zealand, while severity has dropped back slightly to pre-COVID levels. Tower has applied targeted premium increases across motor and home to offset inflation and continues to work closely with supply chain partners to moderate the impact on customers as much as possible. Our new artificial intelligence-based tool that identifies potentially unjustified claims went live in FY '22. While it is early days, the results are promising. Since implementation began in April, we have improved our detection rate of potentially unjustified claims by 300%, which has led to a greater proportion of claims resulting in customers either withdrawing their claims or Tower declining the claims. We are pleased to see our management expense ratio continue to reduce with an improvement over the year of 1% to 36%. Pleasingly, business growth has enabled scale efficiencies and a 2.9% reduction in MER with a further 0.4% decrease in net commission expenses due to the legacy back book portfolio purchases. In addition, we reduced our expectations of future policy administration costs, which allowed us to unwind the liability adequacy test deficiency recognized at 30 September 2021, resulting in a 1.4% benefit. We elected to reinvest this let, re-lease in people, marketing and technology as we prioritize growth and regulatory compliance activities. Other MER impacts includes more deferred acquisition costs due to higher acquisition spend, which helped drive our growth. Net investment income in FY '22 increased to $1.2 million before tax compared with income of $0.2 million before tax in FY '21. This subdued income was the result of increases in interest rates revaluing Tower's portfolio to market values. However, these losses are expected to be recovered through higher yields as the portfolio matures in the future. This is evidenced by the running yield on the core investment portfolio increasing to 4.12% at the end of September 2022, up from 1.32% at 30 September 2021. Tower maintains a conservative investment policy with a focus on high credit quality and liquidity bonds and a target duration for the core investment portfolio of 6 months. Our strategy has mitigated the impact on our profit from macroeconomic factors and market movements, and we expect to benefit from higher rates going forward. We continue to settle open Canterbury Earthquake claims with 40 closed over the year. However, we received an additional 43 new overcaps and reopened claims, bringing the total number of open claims at the year-end to 36. This was a net increase of 3 from a total of 33 as at the end of September 2021. As a consequence, FY '22 has seen an adverse Canterbury Earthquake P&L charge of $7.5 million before tax and non-underlying items reflecting these increases and expected claims costs. Contributing to this is $5.4 million in new overcaps, which includes an allowance for future new overcaps and a $4.3 million increase in provision for existing open claims. Remaining reinsurance cover partially mitigates these 2 factors by $2.2 million. A contributing factor to the additional new overcap claims is that the $100,000 cap is not inflation-adjusted. So the cost of the same repair is now higher. We will work with EQC to help mitigate these additional costs. Some of our open Christchurch earthquake claims are complex and long-term. The expected cost for several of these has increased in FY '22, driven by both inflation and more costly rectification approaches, and we've increased our provisions to address this. We continue to closely manage these outstanding claims and our dedicated Christchurch earthquake team is actively working to finalize claims as efficiently as possible. In September, we were pleased to successfully renew our reinsurance program for the 2023 financial year, obtaining comprehensive cover with very competitive rates for our home, motor, boat and commercial portfolios across New Zealand and the Pacific. Tower's reinsurance strategy provides protection from volatility caused by large events and maintains financial flexibility to support growth while underpinning strong solvency. Under this new arrangement, we have increased our catastrophe upper limit from $873 million to $934 million in FY '23 to reflect business growth. The catastrophe cover excess is $11.9 million, in line with previous years. In FY '23, we will be paying proportionately less for reinsurance cover at 13.6% of total income compared to 15.9% of premium income in FY '22, including the previous aggregate program. This proportional reduction reflects reinsurers' confidence in Tower's positive business performance. To manage the impacts of large events volatility on our results, we have budgeted for $30 million of large events in our FY '23 plan. For context this is almost $9 million more than ultimate estimate of large event costs for FY '22 and more than double, the 10-year average of $13 million and well above the 5-year average of $16 million. FY '22 large events of $21.1 million comprised $6.8 million for the Tonga volcanic corruption and tsunami, $3.6 million for Cyclone Dovi, $6.4 million for the North Island Rainstorms and $4.3 million for the Nelson floods. The expense recorded in Tower's profit and loss was reduced to $19 million after reinsurance recoveries under the FY '22 $20 million aggregate cover excess and a $1 million recovery on a prior period event. In the last 12 months, Tower has returned $55.3 million to shareholders in the form of dividends and capital return. As a result of these payments to shareholders, Tower's surplus capital has decreased. However, with a solvency ratio of 205% as at 30th September, after the capital return and final dividend, it is clear that Tower remains in a strong capital and solvency position. As the Chair announced, we will be paying a final dividend of $0.04 on the 1st of February 2023, bringing the full year dividend to a total of $0.065 per share. In FY '23, Tower anticipates underlying NPAT of between $27 million and $32 million. This range is based on further growth of between 10% and 15% GWP as well as the allowance for large events of $30 million. It represents an $8 million after tax increase and the impact of large events when compared to FY '22. Consistently with FY '22, we will measure large events as those which have a total cost of more than $2 million. In line with Tower's ordinary dividend policy to pay a sustainable annual dividend in the range of between 60% to 80% of adjusted earnings we are prudent to do so. Tower anticipates FY '23 dividends to be $0.065 per share. Thank you. I'll now hand back to Blair, who will provide an update on our outlook.

Thank you, Paul. Tower is continuing to leverage investments in our scalable platform to deliver shareholder value by attractive long-term growth and greater efficiencies. And 2 areas where we are targeting efficiencies are in our customer service and claims processes. And in FY '23, we expect to see significant improvement through further digital and process optimization. New My Tower improvements to enhance customer experience and further reduce telephony interactions include a car replacement journey. We know that customers predominantly cancel their motor insurance when they've bought a new car. A new feature coming soon aims to capture these customers with the option to replace their car policy rather than cancel. We're also offering customers information at their fingertips on ways to save on their insurance and enhance the ability to update personal details on the go. We are further investing in our enhanced sales capability with our automated marketing platform set to send out over 5 million targeted and personalized messages in FY '23. And following the completion of our digital transformation, the mix of our spends has moved from focusing on our technology platform, systems and regulatory compliance towards customer relationships and growth, reflecting the maturity of our technology transformation. However, it's no secret that a key challenge for New Zealand businesses today is the tight labor market. And for many businesses with active contact centers, this struggle to fill seats has resulted in long wait times and frustrations for customers. Tower has not been immune to these challenges, which have disappointingly set out Net Promoter Score, NPS dropped to 20% from 43% in September 2021. However, we have some clear unique advantages that will allow us to tackle this challenge by our pathway for NPS improvement in FY '23. And this includes, firstly, leveraging our digital self-service platform. In FY '23 digital will comprise 30% of our investment on customer experience and frontline enhancements and will include new My Tower features, further automation and enhanced straight-through claims processing. Secondly, we will make further improvements through our fantastic staff culture and engagement through promoting and developing career pathways for frontline staff and leveraging digital technology to improve the frontline user experience. And thirdly, and excitingly, we will invest in our Fiji Hub by adding an additional 100 Tower people in Suva in FY '23. And this will see the mix of staff more evenly spread between our operational centers in Auckland, Rotorua and Suva and people permanently working from home. Our investments in digital technology are increasingly enabling us to move workflows across our Suva, Rotorua and Auckland operation centers. Having a physical presence in these locations also gives us access to talent in these markets. In Suva particularly, we are offering high-quality roles where our people they appreciate the opportunity to progress their careers and to see positions without having to leave their countries. Tower roles in Fiji comprise a wide range of corporate functions, including finance, technology, human resources, marketing and customer service. Our recent recruitment drives in Fiji have seen strong interest from highly educated, experienced and professional candidates who are excited about becoming part of the Tower team and providing high-quality service to our customers, protecting the future for our customers and communities. Last year, we began our sustainability journey with the development of a strategy that guides how Tower manages its environment, social and governance issues under the following focus areas: firstly, a diverse and inclusive workplace that builds people's physical and emotional well-being. Secondly, ensuring we are thinking ahead for our planet by moving all aspects of our business towards zero carbon and zero waste and having a positive impact on New Zealand and the Pacific. And thirdly, helping communities navigate climate change by champion an informed dialogues and supporting research and education on climate change issues. And finally, being people's go-to trusted insurance partner by providing fair and transparent insurance that is accessible and affordable. In FY '23, we will progress on these commitments by adding coastal, erosion and inundating risks to our customer-facing risk-rating tools, educating homeowners transparently about the risks that may impact their properties. And we're excited about the potential for parametric cyclone cover to improve the economic resilience of Pacific communities in the future. We are also committed to further innovating our products to influence our customers to reduce their carbon footprints. We currently offer a home insurance sustainability benefit, which contributes $15,000 to sustainable products for a total rebuild. Our policies support a range of e-mobility vehicles, and we've updated our GoCarma App to give people real-time feedback on their driving emissions based on their cars make and model and they're driving behavior. We take measuring and reducing our emissions seriously, and we recognize that every effort to reduce emissions helps to mitigate global warming. Tower has set an ambitious target grounded in science of a 21% reduction over 5 years using FY '20 as our base year, which we all know was subject to COVID restrictions. We will present full details of our sustainability reporting in this year's annual report, which has been prepared in accordance with the Global Reporting Initiative 2021 standard. And as the Chair noted, we are currently preparing for the introduction of the external reporting Board's climate-related disclosures regime and are planning an early partial disclosure in FY '23. In summary, it's clear that Tower's business performance has been strong, and we have delivered customer and premium growth while further improving our management expenses and efficiencies. Tower is a well-capitalized business with a strong balance sheet and solvency margins, and we are delighted to have returned $55.3 million to shareholders in the form of dividends and a capital return. In the coming year, our focus is on continuing our solid underlying operating performance and achieving positive customer outcomes and growth. We continue to focus on claims inflation and enhancing claims processes while driving efficiencies through a scalable digital platform and focus on expenses. We remain committed to delivering positive -- returns to our shareholders through continued dividends and accelerating growth. Thank you for your time this morning. I will now hand back to the operator to ask for any questions.

[Operator Instructions] Our first question comes from the line Ben Crozier from Forsyth Barr.

Yes, I think -- it's James Lindsay here as well from Forsyth Barr. Three questions, if I may. Just with regard the first one, maybe just give us an update on the timing of the switch off of going down from the 2 legacy systems down to 1 potentially. And would that be completed by the end of FY '23? Secondly, just with regard to the progress on the new product front, maybe just a bit of an update about how successful the marine and pace, and just how that's helping improve the stickiness of customers as well. And then just finally, just with regard to the EQC update, you talk about sort of the conservativeness of this most recent update. Maybe just talk about the possibility of further increases and what would drive that?

Look, I'll take the first 2 and then I'll pass to Paul on the third one. Firstly, in terms of the legacy systems here, as we have moved from 4 to 2. The 2 remaining systems support our commercial -- primarily commercial books in New Zealand and in the Pacific. Our plan is to, as detailed previously, is to move off those systems over the next 1 to 2 years. We won't be completed by the end of FY '23, James, but we will certainly -- my expectation is we will be migrating them off them in FY '23. And so -- it will take a while to complete that cycle as we then renew them on to a new and more advanced platform. On the second one, in terms of product front, we're very pleased with how both in particular, but also pet and travel and construction cover has gone so far. A key part of that strategy, as we mentioned a number of times, is to build out deeper relationships. We know where customers have more than one risk. They stay on average for around about 8 years. If they just have a single risk, it's more like half of that time period. And that's the whole strategy behind building a richer product suite. So we're pleased with how those product lines have started. We've got a few thousand customers in there now. Typically, they're existing customers, and we expect that to accelerate as we look forward, in terms of EQC, sorry.

In terms of Christchurch earthquake provision yes, we have provided quite heavily for it this year, as I said in my slides. We have our third-party actuary who performs that valuation for us. So at this stage, we're happy with the provision that we made. Obviously, inflation continues to be a challenge. And as I called out as well, the flow of earthquake claims coming to the EQC and then coming overcap to Tower is -- it's still proving to be a challenge for us this year, having gone from a net increase of [ 36% ] at the end of this year from 33% last year. So we continue to watch it. We are doubling down our efforts to manage it in FY '23. And we're going to be working even closer with the EQC this year.

And just one follow-up further, just a comment. I appreciate the FY '23 guidance as well with a few of the moving parts. So congratulations on that and also on the result. The final question I just had is with regard to the settlement of PNG, I gather that would be post balance date. So just with regard to the slide on solvency will be considered and improved. Is that how I should have read it?

Yes, correct that it is post balance date. So we've -- our approximate gain on sale is $2.1 million, and that will obviously be a benefit. However, as we announced pre in September, we also have the sale of our -- sorry, we also have the purchase of the Kiwibank legacy book as well, and that will complete on the 1st of December. So those 2 factors will approximately equal and offset themselves during H1 of FY '23.

[Operator Instructions] And I'm not showing any further questions in the queue. I'd like to turn the call back over to Mr. Stiassny for any closing remarks.

I'd just like to thank everyone for being on the call, and again, apologize for that delay this morning. So thanks a lot.